The strong performance in artificial intelligence (AI) stocks in recent years has largely been led by big technology companies, especially those involved in AI infrastructure. However, there are some overlooked, smaller AI stocks that have the potential to go parabolic if things fall their way.
Let's look at three small AI stocks with big potential for outsized growth.
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UiPath
While the early stages of AI have mostly focused on generative AI, which can create content-based prompts, the next phase is agentic AI, in which the technology will perform tasks. Right now, there are a plethora of companies going after this phase. However, the issue of agent sprawl is a huge opportunity for UiPath (PATH 7.88%).
NYSE: PATH
Key Data Points
The company was originally a leader in robotic process automation (RPA), where simple software bots help automate rule-based tasks like data entry. While AI agents can perform much more advanced tasks than software bots, this background has given the company the foundation to not only manage software bots, but also AI agents.
UiPath has developed an orchestration platform just for this purpose, which will become increasingly important as organizations are faced with managing a plethora of AI agents from a variety of third-party vendors.
The stock is cheap, trading at a forward price-to-sales multiple (P/S) of around 5, and its revenue is just starting to accelerate. That sets the stock up to go parabolic if it can become a leader in AI agent orchestration.
GitLab
Despite growing its revenue between 25% and 35% over the past two years, GitLab (GTLB 1.38%) has been one of the market's most maligned stocks, which has brought its valuation down to a forward P/S below 5.5. The company runs a DevSecOps (development, security, and operations) platform that customers use to securely develop software. But despite its strong growth, the market has dubbed it an AI loser over fears that AI will replace coders, hurting GitLab's business.
NASDAQ: GTLB
Key Data Points
Thus far, that has not happened. The company has been adding new customers, seeing existing clients upgrade to higher-priced tiers, and -- most of all -- seat expansion (adding subscriptions for additional coders).
GitLab has a couple of growth catalysts. It has launched its own AI agents that can help programmers not just write code, but also help with their work throughout the entire software development cycle. It's also moving to a hybrid model that should let the company benefit from the increased value it is now providing its customers.
If GitLab can continue to prove the bearish thesis wrong and see some revenue acceleration, the stock could have some huge upside given its low valuation.
SentinelOne
SentinelOne (S 2.47%) is another cheap AI stock growing quickly, trading at a bargain basement multiple. The AI-powered cybersecurity company has a forward P/S below 4.5, which is a fraction of the multiple of its larger peers. But the company has been growing its revenue more quickly and has a strong cybersecurity solution.
It also has a few growth catalysts on the horizon. It signed a deal with Lenovo, the world's largest enterprise computer vendor, to have its Singularity Platform installed on the vendor's computers.
NYSE: S
Key Data Points
That partnership is still ramping up, and it will also provide a launching pad to have enterprises and consumers upgrade to its Purple AI and Wayfinder Managed Detection and Response (MDR) offerings. And its recent acquisition of Prompt Security thrusts the company to the forefront of the fast-growing cybersecurity segment of AI data leakage.
This helps the company differentiate itself, since it now offers both inside-out and outside-in protection.
If SentinelOne's revenue starts to accelerate and the company begins to see more operating leverage, its stock could go parabolic given its inexpensive valuation and growth prospects.
